de Vries F (2007) Market structure and technology diffusion incentives under emission taxes and emission reduction subsidies. Journal of Institutional and Theoretical Economics (JITE), 163 (2), pp. 256-268. https://doi.org/10.1628/093245607781261388
This paper compares emission taxes with emission reduction subsidies regarding the incentives they create to enhance technology diffusion under imperfect competition. Firms can adopt a "dirty" technology or a "clean" abatement technology. If the clean and dirty products are perfect substitutes, and clean firms face a net absolute advantage over dirty firms, taxes provide the strongest incentive. This ranking is reversed if there is a distortion on output. Subsidies can neutralize this distortion because output supply is stimulated, which would normally be lower than optimal under perfect competition.
Journal of Institutional and Theoretical Economics (JITE): Volume 163, Issue 2